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Euler Hermes
Economic Outlook no. 6 | 2011 - Global Sectors Review
Global risk
B
Chemicals
In tune with the health of world trade
Overview: back to a bull cycle
Estimated at €2.1 trillion excluding pharmaceuticals,
worldwide chemical sales recovered remarkably in 2010. This
came on the heels of two dangerous years, in 2008 and even
more in 2009, during which period they fell to €1.87 trillion.
World chemical production rose 9.3% by volume between 2009
and 2010, boosted in particular by output in Asia (+13%) and in
the European Union (+10%). It benefited from massive
restocking and from a dramatic revival in demand from
operators in the chemical industry’s biggest markets, led for
their part by the electronics and automotive sectors. Asia,
North America and the EU together account for 85% of global
chemical turnover, with China on its own accounting for 22%
and now tailing Europe, at 24%.
Current situation: a successful year
The effects of the cyclical upturn in the sector at the end of
2010, translated into excellent financial performances by the
major world chemical operators, such as BASF, which doubled
its profitability. The measures operators took in response to the
crisis to boost productivity and refocus on activities in which
they occupy key positions have helped in this. But some
geographical markets, like some segments of the chemicals
sector, are not doing so well as others. European petrochemical
companies, for example, are forced to restructure in the face of
price competition from their Middle Eastern counterparts. On
the other side of the Atlantic, the industry is suffering from the
poor state of its second biggest market, residential
construction, which failed to revive last year. In the end, it is
Asia and the EU that are benefiting more from the growth in the
chemicals market: Asia – including, of course, China – through
their necessary investments in infrastructure and in
developing their industries, and the EU due to its strong
positioning in exports, posting a 2010 sectoral trade surplus of
€47 billion. The slight slowing of activity in the sector in Q4 2010
proved only short-lived. The first quarter of 2011 brought a
revival in chemical production, with the European industry, for
example, posting a quarterly increase of 3.2% (after +1.5% in
Q3).
Outlook: 2011 looks good
Even so, European chemical production has not caught up to
its pre-crisis level. At its current rate, it will achieve this during
2012. The European Chemical Industry Council (CEFIC) has
revised its 2011 growth forecast for the European chemical
sector upwards to 4.5% by volume, against an initial forecast of
below 3%, boosting our forecast for world market growth to 7%.
The impact of a potential upward drift in material input costs –
in the first place, oil – would seem to weigh less than before on
the margins of the major players in the sector. Acting on the
lessons of the past crisis, they have become key players in
certain fields, gaining positions where they can resist calls
from their customers to cut prices. _ML
Major world chemicals groups
Rank Company Nationality Turnover 2010 Change
USD billions 2010/2009
1 BASF Germany 85 20%
2 Dow Chemical USA 54 20%
3 Lyondellbasell (*) USA / Luxembourg 41 34%
4 Sabic Saudi Arabia 41 47%
6 Dupont de Nemours USA 32 21%
7 Ineos (**) UK 31 22%
8 Bayer Germany 24 15%
9 Mitsubishi Chemical Japan 21 -11%
10 Akzo Nobel Netherlands 19 7%
(*)
Basis not comparable (**) Estimates
Source: Companies
World chemical production, by region
Zone 2010 2000
European Union 24% 32%
North America 21% 28%
Asia (excl. Japan and China) 16% 13%
Japan 6% 12%
China 22% 6%
Latin America 5% 4%
Rest of world 6% 5%
Source: Cefic Chemdata
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